Emkay Global Financial has given Buy recommendation for Bandhan Bank with a target price of Rs. 390 in its research report issued on Jul 16, 2021
Emkay Global Financial’s report on Bandhan Bank
Bandhan Bank’s AUM grew at a lower-than-expected rate of 8% yoy (down 8% qoq) to Rs801bn. We believe that this could be primarily due to lower disbursements in the MFI and small business loan segment on account of Covid-led disruptions in Eastern India, which is still reeling under extended lockdowns. Ujjivan, a relatively close peer, has also reported 2% yoy/7% qoq decline in AUM, while the impact on growth was relatively moderate for Equitas SFB, with its AUM up 15% yoy/down 0.5% qoq on lower dependence on the MFI book.
Notwithstanding near-term asset-quality risk, we have a Buy rating (TP: Rs390) on the stock, given its strategy of diversifying asset portfolio away from MFI in terms of both products and geography, enviable liability profile, superior return ratios (RoA/RoE of 2.5-3.4%/17-25% over FY22-24E) and reasonable valuations (2.2x FY23E ABV/1.7x FY24E ABV).